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Gold prices edged down on Tuesday, with investors looking forward to the Federal Reserve policy meeting as expectations grew that the U.S. central bank could pause raising its interest rates given the upheaval among banks.

FUNDAMENTALS

* Spot gold was down 0.1% at $1,977.69 per ounce, as of 0044 GMT. U.S. gold futures also fell 0.1% to $1,981.30.

* Gold prices had shot up to their highest level since March 2022 at $2,009.59 in volatile trading on Monday before retreating, as investors digested the impact of measures taken by several central banks to contain a banking crisis and stabilise global financial markets.

* Swiss lender UBS agreed to buy rival Credit Suisse on Sunday for $3.23 billion and assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities.

* Markets are pricing in a 53% chance that the U.S. policymakers will hold their benchmark lending rate in the current 4.50%-4.75% range at the end of their closely-watched March 21-22 policy meeting.

* European Central Bank policymaker Robert Holzmann on Monday watered down his recent call for three further interest-rate increases of 50 basis points in quick succession.

* Gold tends to benefit from low interest rates as it reduces the opportunity cost of holding non-yielding bullion.

* The dollar edged up 0.1%, making bullion less attractive for buyers holding other currencies. [USD/]

* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.38% to 924.55 tonnes on Monday from 921.08 tonnes on Friday. [GOL/ETF]

* Spot silver edged down 0.1% to $22.49 per ounce, platinum was flat at $988.33 and palladium was listless at $1,413.97.

DATA/EVENTS (GMT)

1000 Germany ZEW Economic Sentiment March

1000 Germany ZEW Current Conditions March

1400 US Existing Homes Sales Feb

U.S. Federal Reserve's Federal Open Market Committee

starts its two-day meeting on interest rates